Is America Overbanked or Underserved?

In an article published on American Banker earlier this fall, BB&T Chairman and Chief Executive Kelly King asserts the industry is overbanked. “It’s more competitive today than it’s been at any time in my career. That’s why you’ve been seeing dramatic consolidation and why you will continue to see it.”

Mr. King’s contention with too much competition and lowered return on investment as a valid reason for the continued decrease in banking presence, is one we’d like to respectfully disagree with. As you may have read in our article “Cutting Rules On Community Banks Will Grow Local Economies”, community banks are decreasing precisely when we need them most. While the overall number of U.S. banks has shrunk from over 18,000 three decades ago, to roughly 5800 now, community banks make up less than 20 percent of the financial industry’s assets while providing more than half of the nation’s small-business loans.

According to a 2017 J.D. Powers study, “Overall retail bank satisfaction is significantly higher among customers who have visited a branch within the past 12 months vs. those who have only used digital channels.” This supports the assertion that even in this highly digital age, there’s a level of service that takes place in person that cannot be replaced. And with community banks being the ONLY physical banking presence in almost 1 in 5 U.S. counties, it’s all the more reason for us to stop the decline and absorption of community banks by the megabanks of this country.

A 2012 Edelmen study showed that since the financial crisis, consumers’ confidence in banks’ ability to “do the right thing” has plummeted a stunning 46%. Respondents ranked “has ethical business practices” (76%), “listens to customer needs and feedback” (74%), and “places customers ahead of profits” (73%) as the most important actions financial firms should take to rebuild trust.

The community bank represents a banking relationship built on trust, personal knowledge and customer satisfaction that simply is not the focus for most megabanks. Wells Fargo made waves in the past year when they were called out on the creation of sham accounts – an intentionally malicious practice that was driven by increasing pressure to squeeze every last penny from consumers. If we are to protect our community banks and the ideals they represent, thereby supporting, promoting and benefitting the towns and neighborhoods in which they reside, then it’s imperative that we don’t sit idly by and watch our community banks get swallowed up.

While we realize this case for community banks is being made to its biggest cheerleaders, let this be a fire to reignite our passion. Let’s be encouraged that our active involvement in associations such as BCBA and ICBA is time well spent in the good fight.